Opinion: Bunnings should not be bothering with a small format

Amid the news of French and Australian mega-mall mergers last week, a somewhat smaller story by comparison appeared about Aussie DIY giant Bunnings.

The Antipodean fix-it-up merchant is to try a smaller format in Bicester, and it will be a third of the size of the dozen big-box stores that have so far appeared bearing its name.

In the usual run of things and in more normal times, an observer might be inclined to applaud the move; finding out what works in a new market is rarely a bad thing.

“At this point, the obvious question if things are that tricky to chew on, is why is more being bitten off in the shape of a smaller format?”

For Bunnings, however, these are extraordinary times. It is currently contending with the problem of converting the Homebase stores that it bought as part of its UK entry, having recently revealed it haemorraghed £54m in its first full year in this country.

At this point, the obvious question if things are that tricky to chew on, is why is more being bitten off in the shape of a smaller format?

One of the reasons given for the lacklustre performance was the £19m spent on one-off transition and restructuring costs as the company started converting stores from Homebase to Bunnings Warehouse branches.

Again, this would be fine if a couple of dozen stores were involved, but in the Homebase scheme of things, it is small beer. Many more await conversion at a price that looks steep when considered in the warehouse retail scheme of things.

Lessons from B&Q and others

But back to the small-format idea. If pockets are deep, and it is to be hoped that this is the case with Bunnings, then perhaps a small format might not be a bad idea. But it might do worse than take a look at B&Q.

Its rival opened a local, very small format, store on London’s Holloway Road earlier this year, and while this ticks over there has been no word from the company’s management about extending the experiment.

It is tempting to suppose that by this stage if things were rosy then more B&Q small stores would be appearing, but the retailer seems to have other fish to fry.

Bunnings should be taking notice, saving its cash for the mammoth task of converting the Homebase portfolio and making what it already has function more efficiently.

And if it needs proof of ignoring what is done by existing players, the lesson provided by Best Buy’s brief UK sojourn a few years back is a salutary one.